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Revenue Seeking: Michigan Lawmakers Consider Sales Tax Increase

  • Jan 22, 2013 | Gail Cole

 How Will Michigan Fund Road Improvements?

Michigan needs better roads. Last week during his State of the State Address, Governor Rick Synder (R) underscored his commitment to invest in the state's transportation systems: roads, bridges, railways, and harbors. He noted that he has asked the question, "Does anyone in Michigan like their roads?" in hundreds of town hall discussions around the state. The response? "I have not seen any hands go up."

The governor says the state needs to invest "$1-1.2 billion more a year" in transportation. He thinks that money should come from user fees. "You got a car? You're using the roads. You buy gas? You are using the roads. So it's about user fee increases… ."

Investing in the roads is an opportunity to keep citizens safe, create jobs, and "save a whole lot of money and not stick our kids with a big bill… ."

The governor's plan would do the following (The Detroit Free Press):

  • Remove the 19-cent per gallon gasoline tax;
  • Impose a sales tax on the wholesale level; and
  • Increase vehicle registration fees.

Funding Options

Senator Roger Kahn (R-Saginaw), "who is spearheading the transportation funding overhaul," has said that "there are a few different [revenue] options on the table, all of which need thoughtful consideration… ." He has pledged "to work toward a sustainable, long-term solution to our transportation funding needs and the best plan for Michigan."

The senator is expected to unveil a package calling for an increase to the gas tax and vehicle registration fees, and "a ballot proposal in May letting voters choose whether to keep those increases or raise the sales tax by 2 percent, with the additional revenues going towards roads." Mike Nystrom, executive vice president of the Michigan Transportation and Infrastructure Association, says he "likes the sales tax approach because it provides for greater revenue growth over time." All the same, he expects resistance to the idea of using sales tax revenue to fund roads rather than schools.

A statewide vote would be required to amend "the state constitution to increase the state sales tax" by 2% and to dedicate those funds to "fixing and maintaining the state's roads and bridges." (The Detroit Free Press).

Governor Snyder has said he is open to "giving voters a choice." However, he favors user fees over a general hike to the state sales tax.

photo credit: net_efekt via photopin cc

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.